How will the end of the historic low affect borrowers, savers and investors?

HOUSEHOLDS are being urged to consolidate their finances to prepare for a
sharp rise in interest rates.

Speculation about a steeper than expected increase mounted last week when
Charlie Bean, deputy governor of the Bank of England, said rates could reach
3% within the next three to five years after first rising next spring. Bank
rate has remained at a record low of 0.5% since March 2009.

This means that borrowers with tracker mortgages could end up paying 5.3%, as
Bank data shows that these deals are typically 2.3 percentage points above
Bank rate.

Homebuyers will be hit hard by the Bank rate rise, and the cost of loans has
already been going up in anticipation. Mortgage swap rates — the cost of
borrowing for banks — have steadily increased over the past few weeks,
putting pressure on lenders to raise the cost of fixed mortgage deals.